Are employee benefit payments tax deductible?
The General Department of Taxation - Ministry of Finance has just answered questions for businesses about deductible and non-deductible expenses when determining taxable income.
Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance guiding on corporate income tax (CIT) amends and supplements Article 6 of Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance stipulating deductible and non-deductible expenses when determining taxable income as follows:
"1. Except for the non-deductible expenses specified in Clause 2 of this Article, enterprises are allowed to deduct all expenses that meet the following conditions:
a) Actual expenses incurred related to the production and business activities of the enterprise.
b) Expenditures have sufficient invoices and legal documents as prescribed by law.
c) Expenses for goods and services purchased for a single time with a value of 20 million VND or more (price including VAT) must have a non-cash payment document when paying.
Non-cash payment documents are made in accordance with the provisions of legal documents on VAT...
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2. Expenses that are not deductible when determining taxable income include: ...
2.6. Paying salaries, wages, and bonuses to employees in one of the following cases:
a) Paying salaries, wages and other payable amounts to employees that the enterprise has accounted for in production and business costs during the period but is not actually paid or does not have payment documents as prescribed by law.
b) Salaries, bonuses, and life insurance expenses for employees that do not specifically state the conditions and levels of benefits in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the Company, Corporation, Group; Bonus regulations prescribed by the Chairman of the Board of Directors, General Director, Director according to the financial regulations of the Company, Corporation, etc.
2.30. Expenses that do not correspond to taxable revenue, except for the following expenses:
- Welfare expenses directly paid to employees such as: Funeral and wedding expenses of the employee and his/her family; vacation expenses, treatment support expenses, expenses to support additional knowledge and study at training facilities; expenses to support employees' families affected by natural disasters, war, accidents, and illnesses; expenses to reward employees' children with good academic achievements; expenses to support travel expenses on holidays and Tet for employees; accident insurance, health insurance, other voluntary insurance for employees (except for expenses to buy life insurance for employees as guided in Point 2.6, voluntary retirement insurance for employees as guided in Point 2.11 of this Article) and other welfare expenses. The total amount of welfare expenses mentioned above shall not exceed 1 month's average actual salary in the tax year of the enterprise.
The determination of 01 month's average actual salary implemented during the tax year of an enterprise is determined by dividing the salary fund implemented during the year (:) by 12 months. In case the enterprise has been operating for less than 12 months: The determination of 01 month's average actual salary implemented during the tax year is determined by dividing the salary fund implemented during the year (:) by the actual number of months of operation during the year.
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The implemented salary fund is the total actual salary paid in that settlement year up to the final deadline for submitting the settlement dossier as prescribed (not including the amount of salary reserve fund deductions of the previous year spent in the tax settlement year).
Based on the above provisions, if an enterprise incurs welfare expenses directly paid to employees, if it meets the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC mentioned above, has full payment documents as prescribed, the expense level is in accordance with the regulations and rules of the enterprise and the total expense does not exceed 1 month of average actual salary made in the tax year, it can be included in deductible expenses when determining taxable income of the period.
